Home Blog Page 93

Ask Barry: “How Should I Trade Crude Oil?

3

Here’s another question from the “Ask Barry” service.

If you don’t already know, this is a service where anyone can ask me a question about the market, technical analysis, trading, money management, etc.

You can use the form in the right column of this blog (scroll down a bit to find it). I personally answer all questions.

Today’s question:

“How do you trade a volatile market like Crude Oil?”

Crude OilGood question. But tough to answer for 2 reasons:

  1. This question is too broad for such a vehicle such as “Ask Barry.” At the risk of sounding too promotional, I have a specific methodology I use for trading everything, and that would include Crude Oil. So to fully answer the question I’d have to teach you my whole method, which takes 6 videos in my Foundations Course #1.
  2. You didn’t mention the time frame you want to trade it – swing trading or day trading.

So I’ll use this opportunity to bring up another very important point. You talk about Crude Oil being a “volatile” market. I’d be curious to understand why you identify it as such.

Perhaps you’re day trading it.

Crude Oil may have a “reputation” for being volatile, but be vary leery of reputations in the market! Markets change, and just when everyone agrees that any given market has a certain characteristic … it changes.

Therefore never accept a label for any market based on what you hear experts saying on TV, or teachers telling you (including me) or you read in a paper, newsletter or magazine.

The only measure of a market’s characteristic must be an OBJECTIVELY MEASURED one, not anyone’s opinion.

Above is a daily chart of Crude Oil. How do we know if it is a volatile market?

Simple.

We add the volatility indicator to the chart. That gives an objective measurement.

As you can see, volatility is down tremendously on a relative basis. Therefore right now (and the markets continually change), Crude Oil is not a volatile market at all (on a daily chart).

Another example:

Several years ago I had been trading the Euro to the long side. I told many friends in my trading club about the amazing trend in the Euro that lasted for years and years. But others didn’t want to trade it. They stayed with the ES.

Then in December of 2004 several of them said they finally decided to get in on this never-ending up trend in the Euro.

Too late!

By the time the reputation of the Euro as a trending market finally caught on with everyone … the trend ended of course!

Sorry, but here’s the no-hype truth:

  • There are no “simple” answers to trading.
  • To make money trading requires learning a complete trading methodology from a professional.
  • Even after learning a valid trading method, you will still need to go through the school of “hard knocks” to learn from the mistakes of your own experience.
  • All of this takes a lot of time and money.
  • Therefore you better love trading!

That may sound quite daunting, and that’s because I want it to. It won’t sell many trading courses, but I’d rather you knew the truth before you decided if you’re willing to pay the real price of becoming a professional trader.

But there is good news:

If you have the financial and psychological ability to make it through the very steep learning curve, and you come out the other side … then the financial rewards can be staggering!

Ask Barry: “Is Oil Going Higher?”

3

The new “Ask Barry” service is going well. This free service allows anyone (you don’t have to be a student of mine) to ask me a question about the market, technical analysis, trading, money management, etc.

I answer all questions personally via email, and then I choose some questions as topics for this Blog (I won’t reveal the identity of the person asking the question of course).

Today’s “Ask Barry” question is:

“What do you think is happening with oil prices? Has the market reached its saturation?”

I decided to give everyone something extra and answer the question with a free video! You can access the video here:

OIL MARKET VIDEO

The video is in “Flash” format. You can get the latest free Flash Player for viewing videos at: Adobe Systems Inc.

PLEASE BE PATIENT Depending on the speed of your Internet connection, THE VIDEO MAY TAKE A COUPLE OF MINUTES BEFORE IT STARTS PLAYING.

Bruce Lee and Trading

2

A few years ago a friend (who had never placed a single trade) told me she was going to day trade during the Summer to make money instead of getting a regular Summer job.

Such words are insulting to a real trader. It’s like telling a physician that you’re going to do heart surgery as a Summer job.

Most people wouldn’t equate trading with something as difficult as surgery. Of course when they try to make a living at trading, they realize that it’s much harder than they thought it would be.

And for anyone who makes a living at trading, they know very well how many years of blood, sweat and tears they put into their business to develop the skills they now possess. They also know that a very, very, even minute percentage of people ever reach that status no matter how hard they try.

Still, the truth is, at the risk of sounding cliche:

Trading is simple, but not easy.

Of course that’s true of most things. The principles of Mastery are the same for any discipline.

The great martial artist, Bruce Lee said (I’m paraphrasing):

“Before you take Kung Fu, a punch is just a punch.
When you learn Kung Fu, a punch is no longer just a punch.
When you master Kung Fu, a punch is just a punch.”

That’s been true of anything I’ve learned. Every sport, every business and every art. And it’s true in trading as well.

Before we start trading, it looks so simple and easy:

  • Just follow the trend, and buy on dips.
  • Just buy the breakout
  • Just trade the double tops, double bottoms and head and shoulders
  • Just trade the trendline.
  • Just …

Simple.

Easy.

Then you learn about trading and find out it’s not as easy as it first looked.

So you try different moving averages and different indicators and different time frames and different charting platforms and different books and different trainers and …. then you realize that trading is not easy or simple.

But if you stick with it long enough, and go through all that “stuff,” and don’t quit, you get frustrated with it all and you realize that there is nothing that predicts what the market is going to do.

Nothing

At

All.

So you go back to basics.

And after seeing all the stuff that doesn’t work, you fall back on the simple basic things:

  • A basic trend indicator
  • A basic momentum indicator
  • A basic cycle indicator
  • Be more patient and take fewer, better trades.
  • Employ impeccible discipline and money management (the most well-known secret to trading).

And then trading becomes more simple, less exciting, but more profitable!

Chart Tube

2

I’ve been meaning to do it for a long time … and I finally did it!

Yes, I’ve joined the YouTube phenomena.

I have to say, it’s a cool community and a lot of fun.

I just posted my first video there, so it’s not much, but there will be more to come and they’ll get better and better as I become more comfortable with the technology.

The first video, which I just posted today, is about a mistake many people make with moving averages. A very, very common, simple, but deadly mistake.

Check it out at http://youtube.com/TopDogTrading

While you’re there, make sure you SUBSCRIBE, so you’ll receive notifications of when I post new videos.